SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HFNC FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
<PAGE>
October 3, 1997
Dear Stockholder:
You are cordially invited to attend the second Annual Meeting of
Stockholders of HFNC Financial Corp. The meeting will be held at the Holiday Inn
Center City, 230 North College Street, Charlotte, North Carolina 28202, on
Friday, October 24, 1997 at 11:00 a.m., Eastern Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in HFNC Financial Corp. are
sincerely appreciated.
Sincerely,
/s/H. Joe King, Jr.
-------------------
H. Joe King, Jr.
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
HFNC FINANCIAL CORP.
139 South Tryon Street
Charlotte, North Carolina 28202
(704) 373-0400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 24, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of HFNC Financial Corp. (the "Company") will be held at the Holiday
Inn Center City located at 230 North College Street, Charlotte, North Carolina
28202, on Friday, October 24, 1997 at 11:00 a.m., Eastern Time, for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To elect seven (7) directors for a one-year term and until
their successors are elected and qualified;
(2) To ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending June 30, 1998; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof. Management is not
aware of any other such business.
The Board of Directors has fixed September 16, 1997 as the voting
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Ann G. Benton
----------------
Ann G. Benton
Secretary
Charlotte, North Carolina
October 3, 1997
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
<PAGE>
HFNC FINANCIAL CORP.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 24, 1997
This Proxy Statement is furnished to holders of common stock, $.01 par
value per share ("Common Stock"), of HFNC Financial Corp. (the "Company"), the
holding company of Home Federal Savings and Loan Association (the
"Association"). The Company acquired all of the Association's common stock
issued in connection with the conversion of the Association from mutual to stock
form in December 1995. Proxies are being solicited on behalf of the Board of
Directors of the Company to be used at the Annual Meeting of Stockholders
("Annual Meeting") to be held at the Holiday Inn Center City located at 230
North College Street, Charlotte, North Carolina, on Friday, October 24, 1997 at
11:00 a.m., Eastern Time, for the purposes set forth in the Notice of Annual
Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about October 3, 1997.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted FOR the nominees for director described herein, FOR
ratification of the appointment of Deloitte & Touche LLP for fiscal 1998, and,
upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company written
notice thereof (Ann G. Benton, Secretary, HFNC Financial Corp.); (ii) submitting
a duly-executed proxy bearing a later date; or (iii) appearing at the Annual
Meeting and giving the Secretary notice of his or her intention to vote in
person. Proxies solicited hereby may be exercised only at the Annual Meeting and
any adjournment thereof and will not be used for any other meeting.
VOTING
Only stockholders of record at the close of business on September 16, 1997
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 17,192,500 shares of Common Stock outstanding and
the Company had no other class of equity securities outstanding. Each share of
Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting. Directors are elected by a plurality of the
votes cast with a quorum present. Abstentions are considered in determining the
presence of a quorum and will not affect the plurality vote required for the
election of directors. The affirmative vote of the holders of a majority of the
total votes present in person or by proxy is required to ratify the appointment
of the independent auditors. Under rules applicable to broker-dealers, the
proposal for ratification of the auditors is considered a "discretionary" item
upon which brokerage firms may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions and for which
there will not be "broker non-votes."
- 2 -
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
Election of Directors
The Bylaws of the Company presently authorize seven directors. The
directors are elected annually by the stockholders of the Company for a term of
one year and until their successors are elected and qualified. The Company's
Articles of Incorporation and Bylaws provide that at the first annual meeting of
stockholders at which there are or would be nine or more directors, the Board of
Directors, other than those who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to dividends or upon
liquidation, shall be divided into three classes as nearly equal in number as
possible, with one class to be elected annually. At each annual meeting of
stockholders thereafter, directors elected to succeed those whose terms are
expiring shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders and when their respective successors are elected
and qualified. Stockholders of the Company are not permitted to cumulate their
votes for the election of directors.
No director or executive officer of the Company is related to any other
director or executive officer of the Company by blood, marriage or adoption, and
each of the nominees currently serve as a director of the Company.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If the person or persons named as nominee should be unable or unwilling
to stand for election at the time of the Annual Meeting, the proxies will
nominate and vote for one or more replacement nominees recommended by the Board
of Directors. At this time, the Board of Directors knows of no reason why the
nominees listed below may not be able to serve as directors if elected.
The following table presents information concerning the nominees for
director of the Company for a one-year term expiring in 1998.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
Nominees for Director for One-Year Term Expiring in 1997
Principal Occupation During Director
Name Age(1) the Past Five Years Since(2)
---- ------ ------------------- --------
<S> <C> <C> <C>
H. Joe King, Jr. 65 Chairman of the Board, 1974
President and Chief Executive
Officer of the Company and
the Association since
September 1995 and 1974,
respectively. Vice
President and various other
positions with the
Association since 1962.
J. Harold Barnes, Jr. 53 Director; Executive Vice 1987
President of the Company and
the Association since
September 1995 and 1987,
respectively. Senior Vice
President and various other
positions with the
Association since 1964.
Ray W. Bradley, Jr. 75 Director; presently retired. 1961
Formerly an attorney in private
practice.
Joe M. Logan 81 Director; self-employed real 1972
estate broker and independent
contractor associated with the
real estate firm of McGuire
Properties, Charlotte, North
Carolina since 1976. Prior
thereto, Vice President of
Lance, Inc., a snack food
manufacturer headquartered in
Charlotte, North Carolina.
John M. McCaskill 63 Director; Senior Vice President 1988
of Operations for Belk
Brothers Company, a retail
department store chain
headquartered in Charlotte,
North Carolina.
- 4 -
<PAGE>
<CAPTION>
Principal Occupation During Director
Name Age(1) the Past Five Years Since(2)
---- ------ ------------------- --------
<S> <C> <C> <C>
Lewis H. Parham, Jr. 64 Director; self-employed 1995
primarily as a business
consultant and investor.
Between July 1, 1990 and
July 1, 1994, a partner in
the law firm of Parham,
Helms and Kellam (now
Parham, Helms, Harris,
Blythe & Morton, Charlotte,
North Carolina).
Willie E. Royal 74 Director; presently retired. 1982
Formerly Vice President and
director of Lance, Inc., a snack
food manufacturer
headquartered in Charlotte,
North Carolina until 1986.
The Board of Directors recommends that you vote FOR the election of the
above nominees for director.
- ------------------
(1) As of June 30, 1997.
(2) Includes service as a director of the Association.
</TABLE>
Stockholder Nominations
Article 7.D. of the Company's Articles of Incorporation governs
nominations for election to the Board of Directors and requires all such
nominations, other than those made by the Board or a committee appointed by the
Board, to be made at a meeting of stockholders called for the election of
directors, and only by a stockholder who has complied with the notice provisions
in that section. Stockholder nominations must be made pursuant to timely notice
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered, or mailed postage prepaid, to the principal executive offices
of the Company not later than 90 days prior to the anniversary date of the
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting. The Company has received a notice from a stockholder
in accordance with Article 7.D. advising the Company of the stockholder's
intention to be present at the Annual Meeting and to nominate an individual to
serve on the Board of Directors at such time.
- 5 -
<PAGE>
Each written notice of a stockholder nomination shall set forth: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (e) the consent of each nominee
to serve as a director of the Company if so elected. The presiding officer of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedures.
Committees and Meetings of the Board of the Company and Association
The Board of Directors of the Company meets on a monthly basis and may
have additional special meetings. During the fiscal year ended June 30, 1997,
the Board of Directors of the Company met 12 times. No director attended fewer
than 75% of the total number of Board meetings or committee meetings on which he
served that were held during this period. The Board of Directors of the Company
has established the following committees:
Audit Committee. The Audit Committee consists of Messrs. Logan,
McCaskill and Royal (Chairman). The Audit Committee reviews the records and
affairs of the Company, meets with the Company's internal auditor, engages the
Company's external auditors and reviews their reports. The Audit Committee met
four times during fiscal 1997.
Compensation Committee. The Compensation Committee consists of Messrs.
Bradley (Chairman), Parham and Royal. The Compensation Committee, which reviews
and recommends compensation and benefits for the Company's employees, met two
times in fiscal 1997.
Nominating Committee. During fiscal 1997, the Nominating Committee
consisted of Messrs. Bradley (Chairman), King and Royal. This Committee, which
nominates persons to serve on the Board of Directors of the Company, met one
time during fiscal 1997.
The Board of Directors of the Association met 12 times during fiscal
1997. In addition, the Board of Directors of the Association has established an
Audit Committee, a Compensation Committee and a Nominating Committee.
Executive Officers Who Are Not Directors
Set forth below is information with respect to the principal
occupations during the last five years for the one executive officer of the
Company and the Association who does not serve as a director.
- 6 -
<PAGE>
A. Burton Mackey, Jr. Mr. Mackey has been the Vice President and
Treasurer for the Company and the Association since September 1995 and 1979,
respectively. Mr. Mackey joined the Association in 1961 and served the
Association in various capacities, including Vice President and Controller,
prior to becoming a Vice President and the Treasurer in 1979.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), requires the Company's officers and directors, and persons who own
more than 10% of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers, Inc. Officers, directors and greater
than 10% stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) forms they file. The Company knows of no person who
owns 10% or more of the Company's Common Stock.
Based solely on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the Company
believes that during, and with respect to, fiscal 1997, the Company's officers
and directors satisfied the reporting requirements promulgated under Section
16(a) of the 1934 Act.
- 7 -
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
1934 Act, who or which was known to the Company to be the beneficial owner of
more than 5% of the issued and outstanding Common Stock, (ii) the directors of
the Company, (iii) those executive officers of the Company whose salary and
bonus exceeded $100,000 in fiscal 1997, and (iv) all directors and executive
officers of the Company and the Association as a group.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned as of
Name of Beneficial Owner September 16, 1997(1)
------------------------ ---------------------
No. %
------------ ------
<S> <C> <C>
Home Federal Savings and Loan Association 1,148,384(2) 6.7%
Employee Stock Ownership Trust
139 South Tryon Street
Charlotte, North Carolina 28202
The Shelton Companies 929,583(3) 5.4(3)
301 S. College Street
3600 One First Union Center
Charlotte, North Carolina 28202
Directors:
H. Joe King, Jr. 404,952(4) 2.3
J. Harold Barnes, Jr. 291,050(5) 1.7
Ray W. Bradley, Jr. 68,039(6)(7) *
Joe M. Logan 73,939(7)(8) *
John M. McCaskill 65,039(7) *
Lewis H. Parham, Jr. 118,039(7)(9) *
Willie E. Royal 71,539(7) *
Certain other executive officers:
A. Burton Mackey, Jr. 99,306(7)(10) *
All directors and executive officers of the Company 1,191,903(2)(11) 6.8%
and the Association as a group (8 persons)
- ------------
</TABLE>
(Footnotes on following page)
- 8 -
<PAGE>
* Represents less than 1% of the outstanding Common Stock.
(1) Based upon information provided by the respective beneficial owners and
filings with the SEC made pursuant to the 1934 Act. For purposes of
this table, pursuant to rules promulgated under the 1934 Act, an
individual is considered to beneficially own shares of Common Stock if
he or she directly or indirectly has or shares (1) voting power, which
includes the power to vote or to direct the voting of the shares; or
(2) investment power, which includes the power to dispose or direct the
disposition of the shares. Unless otherwise indicated, an individual
has sole voting power and sole investment power with respect to the
indicated shares.
(2) The Home Federal Savings and Loan Association Employee Stock Ownership
Trust ("Trust") was established pursuant to the Home Federal Savings
and Loan Association Employee Stock Ownership Plan ("ESOP") by an
agreement between the Association and Messrs. King and Bradley,
directors of the Association, and Richard J. Brown, Vice President of
the Association, who act as trustees of the plan ("Trustees"). As of
the Voting Record Date, 66,052 shares held in the Trust had been
allocated to the accounts of participating employees and will be voted
by the ESOP Trustees in accordance with the instructions of the
employees. Unallocated shares held in the Trust will be voted in the
same ratio on any matter as the allocated shares are actually voted.
The amount of Common Stock beneficially owned by directors who serve as
trustees of the ESOP and by all directors and executive officers as a
group does not include the unallocated shares held by the Trust.
(3) Based upon information contained in a Schedule 13D filed with the SEC
by The Shelton Companies, a North Carolina general partnership, Third
Set, Inc., a North Carolina corporation, and each of Charles M.
Shelton, Sr., Sandra G. Shelton, Amanda S. Houser, Charles M. Shelton,
Jr., R. Edwin Shelton, Dorothy M. Shelton, Jennifer S. Egues, Winifred
L. Shelton, Lydia S. Surles, Mark C. Surles and Reid S. Surles. As set
forth in the Schedule 13D and based upon an agreement among the parties
thereto which is included therein, the reporting entities and
individuals are reflected as a group which, in the aggregate,
beneficially own 929,583 shares or 5.4% of the outstanding Common
Stock.
(4) Includes 87,084 shares held by the Home Federal Savings and Loan
Association Savings Plan ("Savings Plan"), 137,540 shares held in the
Company's Recognition and Retention Plan ("Recognition Plan") granted
to Mr. King and not yet vested which may be voted by Mr. King, 143,270
shares which may be acquired pursuant to the exercise of stock options
exercisable within 60 days of the Voting Record Date and 2,673 shares
allocated to Mr. King's account pursuant to the ESOP.
(5) Includes 78,761 shares held by the Savings Plan, 2,500 shares held by
Mr. Barnes' daughter, 15,000 shares held by Mr. Barnes' wife, 2,700
shares held by Mr. Barnes' son, 82,764 shares held in the Recognition
Plan granted to Mr. Barnes and not yet vested which may be voted by Mr.
Barnes, 85,962 shares which may be acquired pursuant to the exercise of
stock options exercisable within 60 days of the Voting Record Date and
2,672 shares allocated to Mr. Barnes' account pursuant to the ESOP.
(6) Includes 1,000 shares held by Mr. Bradley's wife.
- 9 -
<PAGE>
(7) Includes 27,508 shares held in the Recognition Plan granted to the
individual and not yet vested, which may be voted by the individual.
Also includes 28,564 shares which may be acquired pursuant to the
exercise of stock options exercisable within 60 days of the Voting
Record Date.
(8) Includes 3,100 shares held by Mr. Logan's wife.
(9) Includes 5,000 shares held by Mr. Parham's wife.
(10) Includes 32,286 shares held by the Savings Plan, 1,750 shares held by
Mr. Mackey's wife and 2,231 shares allocated to Mr. Mackey's account in
the ESOP.
(11) Includes 145,000 shares held by the Savings Plan for the account of all
directors and executive officers as a group, 401,156 shares which may
be acquired by all directors and executives officers as a group upon
the exercise of stock options exercisable within 60 days of the Voting
Record Date, 385,352 shares held in the Recognition Plan on behalf of
all directors and executive officers as a group, which may be voted by
such individuals pending vesting and distribution, and 7,576 shares
held in the ESOP for the account of all directors and executive
officers as a group.
- 10 -
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of certain information
concerning the compensation paid by the Association for services rendered in all
capacities during the three years ended June 30, 1997 to the President and Chief
Executive Officer of the Association and the other executive officers of the
Association and its subsidiary whose total compensation during the last fiscal
year exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------- ---------------------------------------
Awards Payouts
Name and Fiscal Other Annual
Principal Position Year Salary(1) Bonus Compensation(2)
--------------------------- ---------
Stock Number of LTIP All Other
Grants(3) Options Payouts Compensation(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. Joe King, Jr. 1997 $299,200 $47,500 -- $2,982,899 429,812 -- $48,605
President and Chief 1996 277,400 47,500 -- -- -- -- 3,861
Executive Officer 1995 259,900 10,370 -- -- -- -- 30,000
- ------------------------------------------------------------------------------------------------------------------------------------
J. Harold Barnes, Jr. 1997 $180,100 $27,000 -- $1,794,944 257,887 -- $48,588
Executive Vice 1996 167,000 27,000 -- -- -- -- 2,214
President 1995 157,600 6,595 -- -- -- -- 23,132
- ------------------------------------------------------------------------------------------------------------------------------------
A. Burton Mackey, Jr. 1997 $117,460 $15,600 -- $ 596,580 85,962 -- $40,132
Vice President and 1996 107,860 15,600 -- -- -- -- 1,595
Treasurer 1995 101,860 12,505 -- -- -- -- 29,870
====================================================================================================================================
</TABLE>
(1) Includes directors' fees from the Association and its wholly owned
subsidiary, Home Federal Savings Service Corporation ("Service
Corporation") with respect to Messrs. King and Barnes and director's
fees from the Service Corporation with respect to Mr.
Mackey.
(2) Does not include amounts attributable to miscellaneous benefits
received by the named executive officers. In the opinion of management
of the Association, the costs to the Association of providing such
benefits to the named executive officer during the indicated periods
did not exceed the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for the individual.
(3) Represents the grant of shares of restricted Common Stock pursuant to
the Recognition Plan, which had the indicated value at the date of
grant and had a fair market value of $2,836,762, $1,707,008 and
$567,353 for Messrs. King, Barnes and Mackey, respectively, at June 30,
1997. Twenty percent of the shares awarded vested immediately upon
grant and 20% vest each year over four years commencing one year from
December 30, 1996.
- 11 -
<PAGE>
(4) In fiscal 1997, represents matching contributions of $4,500, $4,500 and
$3,320, on behalf Messrs. King, Barnes and Mackey, respectively, under
the Savings Plan and allocations of Common Stock with a fair market
value of $44,105, $44,088 and $36,812, to Messrs. King, Barnes and
Mackey, respectively, pursuant to the ESOP.
Stock Options
The following table sets forth certain information concerning exercises
of stock options by the named executive officers during the year ended June 30,
1997 and stock options held at June 30, 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercise in Last Fiscal Year
and Year End Option Values
Number of Value of
Shares Unexercised Unexercised
Acquired on Value Options at Year End Options at
Name Exercise Realized Year End(1)
--------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Joe King, Jr. -- -- 143,270 286,542 $405,454 $810,914
- ------------------------------------------------------------------------------------------------------------------------------------
J. Harold Barnes, Jr. -- -- 85,962 171,925 243,272 486,548
- ------------------------------------------------------------------------------------------------------------------------------------
A. Burton Mackey, Jr. -- -- 28,654 57,308 81,091 162,182
====================================================================================================================================
(1) Based on a per share market price of $16.50 at June 30, 1997.
</TABLE>
- 12 -
<PAGE>
The following table sets forth certain information concerning grants of
stock options to the named executive officers during the year ended June 30,
1997.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
====================================================================================================================================
Potential Realizable
Value at Assumed
Individual Grants Annual Rates
of Stock Price
Appreciation
for Option Term(4)
- ------------------------------------------------------------------------------------------------------------------------------------
Options % of Total Options Exercise Expiration
Name Granted Granted to Employees(1) Price(2) Date(3) 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Joe King, Jr. 429,812 27.8% $13.67 December 30, 2006 $3,696,383 $9,365,603
- ------------------------------------------------------------------------------------------------------------------------------------
J. Harold Barnes, Jr. 257,887 16.7 13.67 December 30, 2006 2,217,828 5,619,357
- ------------------------------------------------------------------------------------------------------------------------------------
A. Burton Mackey, Jr. 85,962 5.6 13.67 December 30, 2006 739,273 1,871,477
====================================================================================================================================
(1) Percentage of options granted to all employees and directors during
fiscal 1997.
(2) The exercise price was equal to the fair market value of a share of
Common Stock on the date of grant as adjusted pursuant to the terms of
the Stock Option Plan for a return on capital distributed by the
Company in March 1997.
(3) The stock options were granted on December 30, 1996. One-third of the
options vested and became exercisable on the date of grant and
one-third vest and become exercisable each year over two years
commencing one year from the date of grant.
(4) Assumes compounded rates of return for the remaining life of the
options and future stock prices of $22.27 and $35.46 at compounded
rates of return of 5% and 10%, respectively.
</TABLE>
Directors' Fees
Members of the Board of Directors of the Association receive $1,500 for
each regular monthly meeting of the Board of Directors attended. Directors are
permitted one excused absence per year and otherwise receive one-half of the
normal monthly payment for each unexcused absence thereafter. Members of the
Board serving on committees do not receive any additional compensation for
serving on such committees. Members of the Board of Directors of the Company are
not separately compensated for attendance at meetings of the Board of the
Company.
- 12 -
<PAGE>
Employment Agreements
In connection with the Association's December 1995 conversion, the
Company and the Association (the "Employers") entered into employment agreements
with each of Messrs. King and Barnes (the "Executives"). The Employers have
agreed to employ the Executives for a term of three years, in each case in their
current respective positions. The Executives' compensation and expenses shall be
paid by the Company and the Association in the same proportion as the time and
services actually expended by the Executives on behalf of each respective
Employer. The employment agreements will be reviewed annually by the Boards of
Directors of the Employers, and the term of the Executives' employment
agreements shall be extended each year for a successive additional one-year
period upon approval of the Employers' Board of Directors, unless either party
elects, not less than 30 days prior to the annual anniversary date, not to
extend the employment term.
Each of the employment agreements are terminable with or without cause
by the Employers. The officer has no right to compensation or other benefits
pursuant to the employment agreement for any period after voluntary termination
or termination by the Employers for cause, disability or retirement. The
agreements provide for certain benefits in the event of the Executives' death.
In the event that (i) the officer terminates his employment because of failure
of the Employers to comply with any material provision of the employment
agreement or the Employers change the officers' title or duties or (ii) the
employment agreement is terminated by the Employers other than for cause,
disability, retirement or death or by the officer as a result of certain adverse
actions which are taken with respect to the officer's employment following a
change in control of the Company, as defined, the employee will be entitled to a
cash severance amount equal to three times the employee's base salary, as
defined.
A change in control is generally defined in the employment agreements
to include any change in control of the Company required to be reported under
the federal securities laws, as well as (i) the acquisition by any person of 25%
or more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any two-year period without the
approval of at least two-thirds of the persons who were directors of the Company
at the beginning of such period.
Each employment agreement provides that in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), then such
payments and benefits received thereunder shall be reduced, in the manner
determined by the Executive, by the amount, if any, which is the minimum
necessary to result in no portion of the payments and benefits being
non-deductible by the Employers for federal income tax purposes. Excess
parachute payments generally are payments in excess of three times the
recipient's average annual compensation from the employer includable in the
recipient's gross income during the most recent five taxable years ending before
the date on which a change in control of the employer occurred. Recipients of
excess parachute payments are subject to a 20% excise tax on the amount by which
such payments exceed the base amount, in addition to regular income taxes, and
payments in excess of the base amount are not deductible by the employer as
compensation expense for federal income tax purposes.
- 13 -
<PAGE>
Although the above-described employment agreements could increase the
cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant anti-takeover
effect.
Benefits
Profit Sharing Plan. The Association maintains the Savings Plan, which
was converted from a Money Purchase Pension Plan to a 401(k) Profit Sharing Plan
effective November 30, 1995. Employees are eligible to participate on the first
day of January of any year after completing one year of service with the
Association. The Savings Plan permits participants, subject to the limitations
imposed by Section 401(k) of the Code, and the satisfaction of certain other
legal requirements, to make voluntary tax deferred contributions in an amount up
to 9% of their annual base compensation. The Association may also contribute to
the Savings Plan additional amounts in its discretion. The Association's
matching contributions charged to expense for the year ended June 30, 1997 was
approximately $76,000.
Discretionary contributions made by the Association to the Savings Plan
are allocated to the accounts of plan participants in proportion to each
participant's compensation for the plan year. Benefits from the plan are payable
upon a participant's death, disability, retirement at age 65 or early retirement
(as defined therein), at which time the participant who separates from service
prior to one of those events will be entitled to a portion of his benefits. All
amounts deferred by employees are 100% vested. Vesting of matching and
discretionary contributions is 100% after five years of service. The Savings
Plan also provides for payment of benefits prior to separation from service to a
participant experiencing financial hardship, as determined under the terms of
the Savings Plan. The payment of benefits under the Savings Plan may be made in
a single cash payment, in installments or by the purchase of an annuity.
Non-Employee Directors' Retirement Plan. The Association adopted a
Non-Employee Directors' Retirement Plan ("Directors' Plan") during fiscal 1994
for the benefit of non-employee directors. Upon the later of retirement or
attaining the age of 65, a director who has completed ten years of continuous
service as a non-employee director is entitled to receive for a period of up to
ten years an annual benefit of up to 100% of the total amount of annual
directors' fees during the twelve months preceding retirement. The Director's
Plan also provides a death benefit to a surviving spouse. During fiscal 1997,
the Association accrued approximately $54,000 related to the Directors' Plan.
Supplemental Income Agreements. The Association has entered into
Supplemental Income Agreements (the "Agreements") with certain of its key
employees in recognition of their past service and to encourage future
performance. The Agreements provide for a monthly benefit to certain key
employees following their retirement, which commences with the month of
retirement and ends on the later of the month in which the employee dies or the
180th monthly payment. The Agreements further provide that all 180 monthly
payments will be made to the employees, or their respective designated
beneficiaries or estate in the event of premature death. The amount of the
monthly benefit varies among each of the employees who are parties to the
Agreements. The Agreements for Messrs. King, Barnes and Mackey provide for
- 14 -
<PAGE>
monthly retirement benefits of $3,600, $2,000 and $1,500, respectively. The
Association is providing for the present value of such benefits over the
estimated remaining period of employment. The agreements are to be funded by
life insurance policies owned by the Association on such employees. Deferred
compensation expense was approximately $32,000, $31,000 and $115,000 for fiscal
1997, 1996 and 1995, respectively.
Retirement Payment Agreement. The Association entered into a Retirement
Payment Agreement (the "Retirement Agreement") with Mr. King, in 1985, which was
amended and restated in 1992. The Retirement Agreement provides a monthly
retirement benefit to Mr. King in the amount of $2,345 commencing with the month
he retires and ending on the later of the month he dies or the 180th monthly
payment of such amount. The Retirement Agreement further provides that all 180
monthly payments will be made to Mr. King's designated beneficiary or his estate
in the event of his premature death.
Employee Stock Ownership Plan. The Association has established the ESOP
for employees of the Association. Employees of the Association who have been
credited with at least 1,000 hours of service during a twelve month period are
eligible to participate in the ESOP.
In connection with the mutual to stock conversion of the Association,
the ESOP borrowed $9.0 million from HFNC Investment Corp., a wholly-owned,
Delaware-based subsidiary of the Company, to purchase Common Stock issued in the
Conversion. The loan to the ESOP is being repaid principally from the
Association's contributions to the ESOP over a period of 15 years, and the
collateral for the loan is the Common Stock purchased by the ESOP. The interest
rate on the loan is 8.75%. The Association may, in any plan year, make
additional discretionary contributions for the benefit of plan participants in
either cash or shares of Common Stock, which may be acquired through the
purchase of outstanding shares in the market or from individual stockholders,
upon the original issuance of additional shares by the Company or upon the sale
of treasury shares by the Company. Such purchases, if made, would be funded
through additional borrowing by the ESOP or additional contributions from the
Association. The timing, amount and manner of future contributions to the ESOP
will be affected by various factors, including prevailing regulatory policies,
the requirements of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are held in
a suspense account and released on a pro rata basis as debt service payments are
made. Discretionary contributions to the ESOP and shares released from the
suspense account are allocated among participants on the basis of compensation.
Forfeitures will be reallocated among remaining participating employees and may
reduce any amount the Association might otherwise have contributed to the ESOP.
Participants become vested in their right to receive their account balances
within the ESOP upon completion of their fifth year of service. In the case of a
"change in control," as defined, however, participants will become immediately
fully vested in their account balances, subject to certain tax considerations.
Benefits may be payable upon retirement, early retirement, disability or
separation from service. The Association's contributions to the ESOP are not
fixed, so benefits payable under the ESOP cannot be estimated.
Generally accepted accounting principles require that any third party
borrowing by the ESOP be reflected as a liability on the Company's statement of
financial condition. Since the ESOP has borrowed from HFNC Investment Corp.,
such obligation is not treated as a liability, but is excluded from
stockholders' equity.
- 15 -
<PAGE>
Transactions With Certain Related Persons
All loans or extensions of credit to executive officers and directors
must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public and must not involve more than the normal risk of repayment or
present other unfavorable features.
The Association's policy provides that all loans made by the
Association to its directors and officers are made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. The Association's policy provides that such loans may not involve
more than the normal risk of collectibility or present other unfavorable
features. As of June 30, 1997, mortgage and consumer loans to employees
aggregated $4.7 million or 2.9% of the Company's stockholders' equity as of such
date. All such loans were made by the Association in accordance with the
aforementioned policy.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors recommends
compensation for the Association's employees, which is then ratified by the full
Board of Directors. During the fiscal year ended June 30, 1997, the members of
the Committee were Messrs. Bradley (Chairman), Parham and Royal. During fiscal
1997, no member of the Compensation Committee was a former or current full-time
officer or employee of the Company or the Association. The report of the
Compensation Committee with respect to compensation for the Chief Executive
Officer and all other executive officers for the fiscal year ended June 30, 1997
is set forth below:
Report of the Compensation Committee
The goals of the Committee are to assist the Board of Directors of the
Company, the Association and its subsidiaries in attracting and retaining
qualified management, motivating executives to achieve performance goals and
ensuring that the financial interests of management are reasonable and
consistent with industry standards, management performance and shareholders'
interests. The Committee has commissioned an outside consulting firm to conduct
a compensation study and has reviewed the findings and recommendations in such
study regarding long-term compensation.
In order to establish compensation levels for the Company's Chief
Executive Officer and other executive officers, the Compensation Committee
considered the overall financial, market and competitive performance of the
Company during its first fiscal year as a public company, including net income
of the Company and expense and efficiency ratios. The Compensation Committee
also considered the successful completion of the conversion and the role
specific officers played in the conversion. Further, with respect to the
Association's other executive officers, the Committee considered salary and
bonus recommendations prepared by the Chief Executive Officer to establish
fiscal 1997 compensation.
- 16 -
<PAGE>
Based upon the above factors, the Committee increased Mr. King's base
salary by approximately $21,800 or 7.6% to $299,200 and Mr. King was given a
bonus of $47,500 for his service during fiscal 1997. The Committee provided for
salary increases and bonuses for the other executive officers. In addition,
during the fiscal year, awards were made to Mr. King and other executive
officers under the Company's Stock Option Plan and the Company's Recognition and
Retention Plan.
Following review and approval by the Committee, all issues pertaining
to executive compensation are submitted to the full Board of Directors for their
approval. Messrs. King and Barnes do not participate in the review of their
compensation.
Ray W. Bradley, Jr., Chairman
Lewis H. Parham, Jr.
Willie E. Royal
- 17 -
<PAGE>
Performance Graph
The following graph demonstrates comparison of the cumulative total
returns for the Common Stock of the Company, the SNL Securities $500 million to
$1 Billion Thrift Asset Size Index and the Nasdaq Stock Market Index since the
Company's initial public offering in December 1995.
[GRAPHIC-GRAPH PLOTTED TO POINTS LISTED BELOW]
We need data for this page!!!
The above graph represents $100 invested in the Company's initial
public offering of Common Stock on December 28, 1995 at $10.00 per share. The
Common Stock commenced trading on the Nasdaq Stock Market on December 28, 1995.
The cumulative total returns include the payment of dividends by the Company.
- 18 -
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Deloitte & Touche
LLP, independent certified public accountants, to perform the audit of the
Company's financial statements for the year ending June 30, 1998, and further
directed that the selection of auditors be submitted for ratification by the
stockholders at the Annual Meeting.
The Company has been advised by Deloitte & Touche LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and who will be available to respond to
appropriate questions.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Deloitte & Touche LLP as independent auditors for the fiscal
year ending June 30, 1998.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in October 1998, must be received at
the principal executive offices of the Company, 139 South Tryon Street,
Charlotte, North Carolina 28202, Attention: Ann G. Benton, Secretary, no later
than June 6, 1998. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the 1934 Act, it will be included in the proxy
statement and set forth on the form of proxy issued for such annual meeting of
stockholders. It is urged that any such proposals be sent by certified mail,
return receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Article 8.C. of the Company's
Articles of Incorporation, which provides that business at an annual meeting of
stockholders must be (a) properly brought before the meeting by or at the
direction of the Board of Directors, or (b) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not later than ninety (90) days prior to the anniversary
date of the mailing of proxy materials by the Company in connection with the
immediately preceding annual meeting of stockholders of the Company. No such
proposals were received by such date. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a brief description of the business desired to be brought
before the annual meeting, (b) the name and address, as they appear on the
Company's books, of the stockholder proposing such business, (c) the class and
number of shares of the Company which are beneficially owned by the stockholder,
and (d) any material interest of the stockholder in such business. The chairman
of an annual meeting shall, if the facts warrant, determine and declare to the
- 19 -
<PAGE>
meeting that business was not properly brought before the meeting in accordance
with the provisions of such Article 8, Section C, and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. This provision is not a limitation
on any other applicable laws and regulations.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year
ended June 30, 1997 accompanies this Proxy Statement. Such annual report is not
part of the proxy solicitation materials.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on Form 10-K
for fiscal 1997 required to be filed under the 1934 Act. Such written requests
should be directed to A. Burton Mackey, Jr., Vice President and Treasurer, HFNC
Financial Corp., 139 South Tryon Street, Charlotte, North Carolina 28202. The
Form 10-K is not part of the proxy
solicitation materials.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the election
of any person as a director if the nominee is unable to serve or for good cause
will not serve, matters incident to the conduct of the meeting, and upon such
other matters as may properly come before the Annual Meeting. Management is not
aware of any business that may properly come before the Annual Meeting other
than the matters described above in this Proxy Statement. However, if any other
matters should properly come before the meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Company's Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE- PAID ENVELOPE.
- 20 -
<PAGE>
REVOCABLE PROXY
HFNC FINANCIAL CORP.
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HFNC FINANCIAL
CORP. ("COMPANY") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
OCTOBER 24, 1997 AND AT ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of September 16, 1997,
hereby authorizes the Board of Directors of the Company or any successors
thereto as proxies with full powers of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Holiday Inn Center City located at 230 North College Street, Charlotte,
North Carolina, on Friday, October 24, 1997 at 11:00 a.m., Eastern Time, and at
any adjournment of said meeting, and thereat to act with respect to all votes
that the undersigned would be entitled to cast, if then personally present, as
follows:
1. ELECTION OF DIRECTORS
Nominees for a one-year term:
H. Joe King, Jr., J. Harold Barnes, Jr., Ray W.Bradley, Jr., Joe M. Logan,
John M. McCaskill, Lewis H. Parham, Jr. and Willie E. Royal
[ ] FOR [ ] WITHHOLD [ ] EXCEPT
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below. Unless
authority to vote for all of the foregoing nominees is withheld, this Proxy will
be deemed to confer authority to vote for each nominee whose name is not written
on the line below.
- --------------------------------------------------------------------------------
2. PROPOSAL to ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending June
30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote with respect to approval
of the minutes of the last meeting of stockholders, the election of any person
as a director if the nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the meeting.
Please be sure to sign and date
this Proxy in the box below.
_________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
<PAGE>
Detach above card, sign, date and mail in postage paid envelope provided.
HFNC FINANCIAL CORP.
The Board of Directors recommends that you vote FOR the Board of Directors'
nominees listed above and FOR Proposal 2. Shares of common stock of the Company
will be voted as specified. If no specification is made, shares will be voted
for the election of the Board of Directors' nominees to the Board of Directors,
for Proposal 2 and otherwise at the discretion of the proxies. This proxy may
not be voted for any person who is not a nominee of the Board of Directors of
the Company. This proxy may be revoked at any time before it is exercised.
The above signed hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders of HFNC Financial Corp. called for October 24, 1997, a Proxy
Statement for the Annual Meeting and the 1997 Annual Report to Stockholders.
Please sign exactly as your name(s) appear on this Proxy. Only one signature
is required in the case of a joint account. When signing in a representative
capacity, please give title.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
